SEOUL (Reuters) - South Korea and the United States said on Friday they would deploy an advanced missile defense system in South Korea to counter the threat from nuclear-armed North Korea, drawing a sharp and swift protest from neighboring China.

The Terminal High Altitude Area Defense, or THAAD, anti-missile system will be used only as protection against North Korea's growing nuclear and ballistic missile capabilities, South Korea's Defence Ministry and the U.S. Defense Department said.

"This is an important ... decision," General Vincent Brooks, commander of U.S. forces in South Korea, said in a statement. "North Korea's continued development of ballistic missiles and weapons of mass destruction require the alliance to take this prudent, protective measure to bolster our ... missile defense."

The announcement came a day after the U.S. Treasury Department blacklisted leader North Korean leader Kim Jong Un for human rights abuses. North Korea called this "a declaration of war" and vowed a tough response.

Beijing said on Friday it lodged complaints with the U.S. and South Korean ambassadors over the THAAD decision. It also criticized the decision to impose sanctions on the leader of its ally North Korea.

Analysts say the U.S. moves are likely to further raise tensions between Washington and Beijing ahead of an international court ruling due on Tuesday in a case the Philippines, a U.S. ally, has brought against China's extensive claims in the South China Sea.

China said the THAAD system would destabilize the regional security balance without achieving anything to end North Korea's nuclear program. China is North Korea's main ally but it opposes its pursuit of nuclear weapons and backed tough new United Nations sanctions against Pyongyang in March.

"China strongly urges the United States and South Korea to stop the deployment process of the THAAD anti-missile system, not take any steps to complicate the regional situation and do nothing to harm China's strategic security interests," China's Foreign Ministry said.

"The Chinese side will consider taking necessary steps to maintain national strategic security and regional strategic balance," the defense ministry said in a statement on its website on Friday evening.

A South Korean Defence Ministry official said selection of a site for THAAD could come "within weeks," and the allies were working to have it operational by the end of 2017.

It will be deployed to U.S. Forces Korea "to protect alliance military forces," a joint statement said. The United States maintains 28,500 troops in South Korea, a legacy of the 1950-53 Korean war.

"It will be focused solely on North Korean nuclear and missile threats and would not be directed toward any third-party nations," the statement said.

SEVEN SUMMITS

The decision to deploy THAAD is the latest move to squeeze the increasingly isolated North Korea, but China worries the system's radar will be able to track its own military capabilities.

Russia is also opposed to the basing of a THAAD system in South Korea. Its foreign ministry will take the deployment into account in Moscow's military planning, Interfax news agency quoted it as saying on Friday.

Bonnie Glaser, an Asia expert at Washington's Center for Strategic and International Studies think tank, said the U.S. moves raised tensions with China ahead of the South China Sea ruling but doubted Beijing would reduce cooperation on North Korea.

"Chinese policy toward North Korea, including the degree to which they implement sanctions, is based on China's interests and those will not change as a consequence of this decision," she said.

"The Chinese overreached, thinking they had sufficient leverage over South Korea to prevent the deployment. They miscalculated. The U.S. and Japan have cooperated on missile defense and in many other ways that China has opposed, and Beijing has not retaliated."

Japan has said it is considering another layer of ballistic missile defense, such as THAAD, to complement ship-borne missiles aboard Aegis destroyers in the Sea of Japan and its ground-based Patriot missiles.

Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda said Tokyo supported the Korean deployment "because it bolsters security in the region."

TRUMP'S ARGUMENT

THAAD is built by Lockheed Martin Corp <LMT.N> and designed to defend against short- and medium-range ballistic missiles by intercepting them high in the Earth's atmosphere, or outside it. The United States already has a THAAD system in Guam.

Each system costs an estimated $800 million and is likely to add to the cost of maintaining the U.S. military presence in South Korea, an issue in the U.S. presidential campaign. Republican candidate Donald Trump has argued that U.S. allies South Korea and Japan should pay more toward their own defense.

Michael Elleman, a contributor to Washington-based North Korea monitoring project 38 North, cautioned that the system would not offer absolute protection against a North Korean attack as Pyongyang would likely develop counter-measures, such as by launching missiles in salvos to overwhelm the defenses.

A joint South Korea-U.S. working group has been discussing the feasibility of deployment and potential locations for the THAAD since February.

This followed a North Korean space launch in February that was condemned by the U.N. Security Council as a test of a long-range missile in disguise and the country's fourth nuclear test a month earlier.

North Korea launched an intermediate range ballistic missile off its east coast in late June, a test that was believed to show some advancement in the weapon's engine system.

(Additional reporting by David Brunnstrom in Washington, Ben Blanchard in Beijing and Nathaniel Taplin in Shanghai; Editing by Lisa Von Ahn and James Dalgleish)